Time to Short Copper ?
Trump's 50% Tariffs on Copper and its consciousness. With copper at new all time Hight, what is next for copper.
As of July 10, 2025, the copper market is experiencing significant volatility and a complex interplay of bullish and bearish factors. It's not a straightforward "yes" or "no" answer for shorting copper, as different analyses present conflicting outlooks.
Here's a breakdown of the current situation and factors to consider:
Arguments for Potential Downward Pressure (Supporting a Short Position):
Tariffs and Trade Wars: The implementation of a 50% US tariff on imported copper starting August 1st, 2025, is a major disruption. This is causing significant market adjustments, price inversions between exchanges (e.g., SHFE prices lower than BC prices), and could lead to reduced demand from American buyers due to higher costs. This could also lead to copper being rerouted to other markets (China, Europe, Southeast Asia), potentially leading to regional oversupply.
Seasonal Weakness: Current market analysis notes "weak downstream demand during the off-season" in construction and air conditioning sectors, adding downward pressure.
Potential for Substitution: While copper's superior conductivity makes complete substitution difficult, sustained high prices (especially above $10,000/tonne) could accelerate the exploration of alternatives like aluminum in some applications.
Chinese Demand Concerns: While China is a major consumer, its struggling real estate sector and slower-than-expected industrial recovery could reduce copper imports. Some forecasts also anticipate a loss of momentum in China's copper usage in 2026.
Increased Supply in Some Forecasts: The International Copper Study Group (ICSG) projects a significant global copper surplus in 2025 (289,000 tonnes), more than double last year's, due to higher mine supply and rising smelting capacity.
Arguments for Continued Upward Pressure (Against a Short Position):
Green Energy Transition and EVs: Copper is a critical component in renewable energy technologies (solar, wind, batteries) and electric vehicles (EVs). The global shift towards decarbonization is a strong long-term demand driver. EVs use significantly more copper than traditional cars, and their sales are projected to continue growing.
Infrastructure Spending: Global infrastructure spending is expected to grow, with copper being essential for construction, plumbing, and electrical wiring. Stimulus packages in the US and EU are also encouraging public and private investment.
Supply Constraints: Despite some new production coming online, declining ore grades, unexpected production halts, and political instability in key producing regions (e.g., Democratic Republic of Congo, Peru, Chile) are creating a supply squeeze. Mining disruptions due to labor strikes and environmental concerns also limit supply.
Low Inventory Levels: LME copper inventories have declined year-over-year, and while global stocks are higher than in past years, they are not showing signs of being "empty," but regional tightness is evident, particularly with material being redirected away from tariff-impacted areas.
Analyst Projections: Several major financial institutions, including Goldman Sachs and UBS, have raised their copper price forecasts for 2025, with some predicting record highs (e.g., Goldman Sachs forecasting $9,890/tonne average for H2 2025, with a peak of $10,050 in August 2025, and Mercuria predicting prices north of $12,000).
Long Lead Times for New Mines: Even with increased investment, the average lead time for opening a new copper mine is substantial (almost 18 years), meaning supply shortages could persist.
Speculative Interest: CFTC data shows increased net speculative long positions in copper, indicating bullish sentiment.
Current Price Action (as of July 10, 2025):
Copper prices are currently showing positivity and have been on an uptrend since early April.
COMEX copper prices are nearing all-time highs.
The spread between COMEX and LME copper remains at historical highs, with COMEX prices significantly higher.
Prices for some grades of US copper producer prices and Indian primary cash copper have rebounded.
Conclusion:
Given the conflicting forces, shorting copper for the long time appears to be a high-risk proposition. While there are significant headwinds from new tariffs and some seasonal demand weakness, the strong underlying demand from the energy transition, infrastructure spending, and persistent supply constraints are providing substantial upward pressure. Many expert forecasts are still leaning bullish for 2025.
But for a short time Short, it dose seam attractive. :)
The market is highly volatile, with major policy changes like the US tariffs creating uncertainty and rapid price fluctuations. Investors are in a "wait-and-see" mode regarding the full impact of these tariffs and global trade flow adjustments.
Before considering a short position, it would be crucial to:
Closely monitor the actual impact of the US tariffs on August 1st. How much copper is truly diverted, and how quickly do regional inventory imbalances materialize?
Watch for further data on China's economic recovery and its actual copper consumption.
Track global inventory levels for signs of a significant build-up in non-US markets.
Analyze the strength of the US dollar. A stronger dollar generally makes copper more expensive for non-dollar buyers, which could dampen demand.
Ultimately, the copper market is in a period of intense re-evaluation due to geopolitical and economic shifts. Making a directional bet, especially a short one, without clearer evidence of a sustained demand drop or overwhelming supply surge, carries considerable risk.